India Saw a Spectacular Rise in Gold Demand During Covid-19, Here Is Why

India saw an unbelievable demand for gold consumption post-pandemic due to the fall in the price of gold post Covid-19. Indian households especially the weaker sections of society and the middle-class families opted for huge gold consumption. Physical gold in India was sold at a huge discount in 2021 as a spike in coronavirus cases prompted strict restrictions and kept buyers away.

The middle class is the primary gold consumer and in 2020, 51 per cent of gold demand rose from consumers with incomes between Rs.200,000 and Rs.1,000,000 per annum. For those with incomes above Rs.1,000,000 the share was just 19 per cent. On the other hand, consumers with an income below Rs.200,000 were responsible for 30 per cent of gold demand.

India is the second-largest consumer of gold in the world and an average Indian household invests 11 percent of its overall holdings in the precious metal. However, the situation changed with the advent of Covid-19. India's gold consumption saw a downfall as various states imposed lockdowns due to a rise in COVID-19 cases, dampening the celebration of weddings and key festivals.

As a result, dealers started offering a discount of up to $2 over official domestic prices, inclusive of 10.75 per cent import and 3 per cent sales levies. This led to the jump in gold purchases due to weddings and key festivals such as Akshaya Tritiya when buying gold is considered auspicious.

Sales for gold jewellery doubled year-on-year in 2021, surging past pre-pandemic levels to reach a six-year high of 610.9 tonnes, fuelled by weddings and festival season demand.

Gold consumption in India increased to 797.3 tonnes in 2021, the highest in the past five years, according to the World Gold Council data. The consumption was mainly driven by urban consumers.

South India dominates Indian gold jewellery consumption, accounting for 40% of the country's total jewellery demand. Southern India had approximately 76 per cent of the gold ownership. States like Tamil Nadu, Kerala, Andhra Pradesh, and Telangana constituted 60 per cent purchase of gold during post-pandemic. However, states like New Delhi, Mumbai, Bengaluru, Kolkata, Jaipur, Hyderabad, Chennai and many others have not been away from procuring gold.